The fourth pensions minister in two years is in the building. In May 2015, the minister was Steve Webb, the Liberal Democrat incumbent who was replaced after the general election by Baroness Ros Altman. After just 14 months in office, the post-referendum establishment of Theresa May’s government saw the replacement of Ros Altman by Richard Harrington, in a reshuffle which also saw the position downgraded from full minister to parliamentary under-secretary level. Ten months later and Mr. Harrington is gone, replaced by Guy Opperman, whilst the remit of the role has been expanded to include financial inclusion as well as pensions.
This would appear to indicate that after the five years of innovation in pensions guided by Steve Webb, that period of change has now finished and that the importance of pensions to the new government will be limited. It’s going to be a ‘steady as she goes’ strategy, at least for the duration of the remaining 21 months of the Brexit negotiations period.
That would probably be a good thing if it weren’t for the fact that the previous government had started a move towards a fundamental change in the taxation of pension savings. The Treasury, under Chancellor George Osborne, had signalled a move towards a system where contributions were made from taxed income but that the growth of the money, and the drawdowns from it, would be tax free. The introduction of the Lifetime ISA as a pension savings vehicle was seen as a portent of a major move in this direction and hints were dropped that tax relief for higher earners would be curtailed on the older schemes.
The likelihood now is that all of these plans and proposals will be left on a dusty shelf in the Treasury. It is doubtful whether the Treasury will have an appetite to take on the powerful life and pensions industry given it is already at full stretch dealing with the complexities of the Brussels negotiations.
This is compounded as the new government is totally dependent upon the DUP, a party whose manifesto was fiercely protective of the status quo on issues to do with the elderly. The DUP campaigned on a platform to maintain current levels of state benefits to the elderly, without any cutbacks or means testing. This makes them very unlikely to be supportive of any new initiatives to rein in the amount currently being spent subsidising pension savings via the tax system.
The end result seems to be that the strategy of the government for pensions will neither retreat back to the past by abolishing LISAs but nor will it move forward to embrace major tax changes. We must limp on with this level of uncertainty about the long-term stability of the current rules.
It makes financial planning a bit more of a gamble than it should be but, given the current levels of uncertainty, perhaps that will encourage a more cautious approach from financial planners that is suited to the times. Meanwhile, if we don’t agree with this minister, we can just wait for the next one to come along...